Performance Appraisal Process Issues

How does the PA fit in with rewards, promotions?

Performance appraisal systems can work with or against rewards systems. Effective management and measurement of employee performance help keep the wheels of Human Resources turning. If the performance appraisal process is ineffective, how then, can an organization develop an effective rewards system? (Schraeder, Becton and Portis, 2007, p. 22)

In this case, there seems to be a fairly high degree of social incentive for both Lan and Tsien to perform and be rated well, as it may be an indicator of their value to the organization and favor with higher superiors in the company.

In many Asian countries, PA are often based on employee needs and personal circumstances (e.g. need for extra income to support a large family or recover from an illness) than on performance criteria (Saner-Yui & Saner-Yui, 1984). In Asian countries, there is often a high tendency to base PA on outcomes, as opposed to effort which could send the wrong message if an employee accomplishes their objectives, but doesn’t necessarily perform well, especially if that employee is rewarded financially (Schraeder, Becton and Portis, 2007). Dai (2009) notes that because performance is impossible to measure precisely at all times, which can be further complicated when tied to a rewards system because it could result in an employee being erroneously rewarded or penalized for their performance.

Equity theory suggests that employees place a high degree of importance on their compensation as compared to their co-workers. If an inaccurate performance appraisal were to lead to an increase or decrease in an employee’s pay that was perceived as undeserved, it could have the effect of lowering employee morale. If a performance appraisal scheme was viewed as unjust, it could have a major negative impact on an organization. Fairness is a quality that is necessary for highest levels of performance in social settings and is considered by some to be the...